Financial Half Year Report19 | 20

Contents

		 LEM GroupInterim consolidated statementof financial position

AssetsNotes

in CHF thousands

3		Interim consolidated statementof financial position

30.9.2019

31.3.201912’538Current assets
Cash and cash equivalents

17’123

Accounts receivable

66’14568’651Inventories

35’80239’211761

2’571

Income tax receivable

4Interim consolidated income statement

Other current assets

5		Interim consolidated statementof comprehensive income

Noncurrent assets

6		Interim consolidated statementof changes in equity

Deferred tax assets

7Interim consolidated cash flow statement

8		Notes to the interim consolidated
financial statements

10

2’554

2’226

Total current assets

122’386

125’197

42’41342’209Property, plant and equipment
Right-of-use assets

2

8’469
4’678

5’178

10

13’06013’494

Intangible assets
Other noncurrent assets

1’147

1’036

Total noncurrent assets

69’767

61’916

Total assets

192’153

187’11330.9.2019

31.3.2019

Accounts payable

19’42022’760Accrued expenses

21’18426’047

Liabilities and equity
Notes

in CHF thousands

Current liabilities

Lease liabilities

2

3’194

Income tax payable

10

4’902

5’253

Current provisions

5

1’416

1’778

Interest-bearing loans and borrowings

6

40’0008’000

Other current liabilities

1’035

660

Total current liabilities

91’15164’498

Noncurrent liabilities
Noncurrent lease liabilities

2

5’466

Noncurrent provisions

5

1’799

1’980

Deferred tax liabilities

10

3’065

3’559

Other noncurrent liabilities

7

10’255

3’951

Total noncurrent liabilities

20’584

9’490

Total liabilities

111’735

73’988EquityShare capital

570

570

(1’070)(983)

Treasury shares

8

Reserves

8

7’368

11’616

Retained earnings

8

73’550101’922

Total equity

80’418113’125

Total liabilities and equity

192’153

187’113LEM Financial Half Year Report 19 | 20

Page 3

Interim consolidated
income statement

Interim consolidated statementof comprehensive income

April to September
Notes

2019/20

April to September
2018/19

in CHF thousands

Sales

159’054

168’982

Cost of goods sold(84’722)(91’375)

Gross margin

74’33377’607

Sales expenses(14’581)(15’296)

Administration expense(13’747)(13’824)

Research & development expenses(14’334)(13’067)

Other expenses(0)0

Other income

90

133

31’76235’553Financial expenses

(357)

(112)

Financial income

108

55

Foreign currency exchange effet(1’189)(1’047)

Profit before taxes

30’32334’449(5’233)(7’120)Net profit

25’08927’329Earnings per share, in CHF
Basic & diluted earnings per share

22.02

23.99

Operating profit

9

Income taxes

LEM Financial Half Year Report 19 | 20

2019/20

2018/1925’08927’329(4’647)(3’806)in CHF thousands

10Page 4

Net profit for the period recognized in the income statement
Other comprehensive income to be reclassified to profit and loss
in subsequent periods
Currency translation difference
Income tax
Total other comprehensive income to be reclassified to profit and loss
in subsequent periods

312

575

(4’335)(3’231)(6’225)

2’584

Other comprehensive income not to be reclassified to profit and loss
in subsequent periods
Remeasurement gains/(losses) on defined benefit plans
Income tax

679

(549)

Total other comprehensive income not to be reclassified to profit and loss
in subsequent periods(5’546)2’035

Other comprehensive income/(loss) for the period, net of tax(9’881)(1’196)

Total comprehensive income for the period

15’20826’133

LEM Financial Half Year Report 19 | 20

Page 5

Interim consolidated statementof changes in equity

Interim consolidated
cash flow statement

Attributable to shareholders
Notes
in CHF thousands

1 April 2018 RestatedSharecapital570

Treasuryshares
(1’091)

Capitalreserve
13’034

Translation
reserve(37)

Net profit for the period

Retainedearnings
99’101111’577

27’32927’329Other comprehensive income/(loss)(3’231)

2’035(1’196)

Total comprehensive income(3’231)29’36426’133(45’561)(45’561)

Dividends paid

8

Movement in treasury shares

8

17

(17)

(335)

(335)

30 September 2018 Restated570(1’074)13’017(3’268)82’56991’814

1 April 2019

570

(983)

12’926(1’310)101’922113’125

25’08925’089Other comprehensive income/(loss)(4’335)(5’546)(9’881)

Total comprehensive income(4’335)19’54315’208(47’855)(47’855)

(59)

(59)

73’55080’418Net profit for the year

Dividends paid

8

Movement in treasury shares

830 September 2019

570

(88)

88

(1’070)13’013(5’645)

April to September

Total
equityNotes

2019/20

2018/19

Profit before taxes

30’32334’449Adjustment for noncash items

8’494

7’997

(3’581)(9’447)in CHF thousands

CASH FLOW FROM OPERATING ACTIVITIESInterest received/paid and taxes paid
Cash flow before changes in net working capital

35’23632’999Cash flow from changes in net working capital(5’290)(10’589)

Cash flow from operating activities

29’94622’409CASH FLOW FROM INVESTING ACTIVITIESInvestment in fixed assets(6’253)(7’033)

Investment in intangible assets

(81)

(110)

Increase in other assets

(298)

(126)

Decrease in other assets

140

166

(6’492)(7’104)

Cash flow from investing activities
CASH FLOW FROM FINANCING ACTIVITIESTreasury shares acquired8(4’338)(6’160)Treasury shares divested

8

4’278

5’825

Payment of lease liabilities

2(2’205)

Dividends paid to the shareholders of LEM Holding SA8(47’855)

Increase in financial liabilities

6

45’00052’000Decrease in financial liabilities

6(13’000)(17’000)(18’120)(10’896)

Change in cash and cash equivalents

5’334

4’409

Cash and cash equivalents at the beginning of the period

12’538

17’630(749)(1’127)

17’12320’913

Cash flow from financing activities

Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

LEM Financial Half Year Report 19 | 20

Page 6LEM Financial Half Year Report 19 | 20

Page 7(45’561)

Notes to the interim
consolidated financial
statements

Notes to the interim consolidated
financial statements

1.
General information
LEM Group (the Group) is a leading company in electrical measurement. LEM engineers best-in-class solutions for energy andmobility, ensuring that its customers’ systems are optimized, reliable and safe.
2.
Significant accounting principles
These unaudited consolidated financial statements for the six months ended on 30 September 2019 have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting”. They do not include all the informationand disclosures presented in the annual consolidated financial statements and should therefore be read in conjunction withthose for the year ended 31 March 2019.
The accounting and valuation policies are consistent with those applied in preparing the annual consolidated financial statements for the year 2018/19, except as revised by the newly effective accounting standards/interpretations listed below.
The preparation of the interim consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and related disclosuresat the date of the interim financial statements. These estimates are based on management’s best knowledge of current eventsand actions that the Group may undertake in the future. However, actual results could differ from those estimates.
The financial information is presented in thousands of CHF. The totals are calculated with the original unit amounts, which could
lead to rounding differences. These differences in thousands of units are not changed in order to keep the accuracy of theoriginal data.
In 2019/20, LEM Group introduced the following new standards and interpretations:Standard or ­interpretation

Title

ImpactEffective date

IFRS 16

LeasesSee below

1 January 2019

IFRIC 23

Uncertainty over Income Tax Treatments

None

1 January 2019

LEM Financial Half Year Report 19 | 20

Page 8IFRS 16 Leases
IFRS 16 was issued in January 2016 and replaces IAS 17 Leases and related interpretations.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees
to account for all leases under a single on-balance sheet model comparable to finance leases under IAS 17.
The standard includes two recognition exemptions for lessees: leases of ’low-value’ assets (e.g., personal computers) andshort-term leases (i.e., leases with a lease term of 12 months or less).
At the commencement date of a lease, a lessee recognizes a liability measured at the present value of future lease payments
using an incremental borrowing rate (i.e., the lease liability) and a corresponding asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lease liabilities are thereafter recorded at amortized costwhereas right-of-use assets are depreciated on a straight-line basis over the lease term. Lessees are required to separately
recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
Lessees are also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the leaseterm, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The
lessee generally recognizes the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more
extensive disclosures than under IAS 17.
Adoption of IFRS 16
The Group applied the new standard using the modified retrospective approach. As a consequence, the cumulative impact of
the adoption was recognized in retained earnings at 1 April 2019, and comparative figures were not restated.
The Group used the exemptions proposed by the standard on:–– lease contracts for which the lease term ends within 12 months as of the date of initial application, and–– lease contracts for which the underlying asset is of low value. The Group has leases of certain office equipment(i.e., printing and photocopying machines) that are considered of low value.
The first-time application of IFRS 16 led to the recognition of a lease liability of CHF 10.8 million and a right-of-use asset of CHF
10.8 million. All right-of-use assets are measured at an amount equal to the lease liability at transition. Furthermore, the IFRS 16
adoption generated the following impacts in the first half-year 2019/20 compared to the first half-year 2018/19:–– operating expenses decrease of CHF 0.1 million;–– financial expenses increase of CHF 0.2 million;–– cash flow from operating activities increase of CHF 2.4 million–– cash flow from financing activities decrease of CHF 2.2 million: operating lease payments were replaced by the payment of
the principal portion of the lease liability, which is now reported as a cash outflow in the cash flow from financing activities.
Interests paid on lease liabilities are part of interest paid included in the cash flow from operating activities.

LEM Financial Half Year Report 19 | 20

Page 9

Notes to the interim consolidated
financial statements

Notes to the interim consolidated
financial statements

The following table summarizes the impact of the adoption of the new standard:

EquityAssets
31.3.2019
in CHF thousands

IFRS 16
adoption

1.4.2019
restated

Current assets
Cash and cash equivalents

12’538

12’538

Accounts receivable

68’65168’651Inventories

39’21139’211

Income tax receivable

2’571

2’571

Other current assets

2’226

2’226

Total current assets

125’197

125’197

Share capital

570

570

Treasury shares

(983)

(983)

Reserves

11’616

11’616

Retained earnings

101’922101’922

Total equity

113’125

113’125

Total liabilities and equity

187’113

10’811

197’924

The following table provides a reconciliation between the operating lease commitments as presented in the note 24. of theGroup consolidated financial statements at 31 March 2019 and the lease liabilities recognized in the frame of IFRS 16 implementation at 1 April 2019:
in CHF thousands

Noncurrent assets
Property, plant and equipment

42’209Right-of-use assets

42’20910’811

10’811Intangible assets

5’178

5’178

Deferred tax assets

13’494

13’494

Other noncurrent assets

1’036

1’036

Total noncurrent assets

61’916

10’81172’727

Total assets

187’113

10’811

197’924

31.3.2019

IFRS 16
adoption

1.4.2019
restated

Liabilities and equity
in CHF thousands

Non-cancellable lease payments as of March 31, 2019

-440

Reassessment of extension options

1’054

Lease liabilities as of April 1, 2019 – undiscounted

11’753

Effect of discounting

22’760Accrued expenses

26’047

Lease liabilities
Income tax payable

The following table summarizes the principal exchange rates that have been used in the translation process.

26’047

5’253

4’568

10’811The estimated increase of assets/liabilities presented in the annual report at 31 March 2019 was CHF 18.5 million. The difference of CHF 7.7 million with the above CHF 10.8 million impact at 1 April 2019 is a consequence of a reassessment of extension
options included in the leasing contracts.

22’760
4’568-942

Lease liabilities as of April 1, 2019 – discounted

Current liabilities
Accounts payable

11’139Lease payments for short-term and low value leases

Currency

Income statementof 2019/20

Income statementof 2018/19

Average rate in CHF

Average rate in CHF

Balance sheet
30.9.2019

Balance sheet
31.3.2019

Var in %Half-year rate in CHF

Year-end rate in CHF

Var in %5’253

Current provisions

1’778

1’778

BGN

0.568

0.592

-4.1

0.555

0.571

-2.8

Interest-bearing loans and borrowings

8’000

8’000

CNY

0.144

0.149

-3.4

0.139

0.148

-6.1

Other current liabilities

660

660

DKK

0.149

0.155

-3.9

0.145

0.150

-3.3

Total current liabilities

64’49869’066

EUR

1.112

1.158

-4.0

1.086

1.116

-2.7

GBP

1.252

1.309

-4.4

1.223

1.296

-5.6

JPY

0.00920.0089+3.4

0.00920.0090

+2.2

4’568

Noncurrent liabilities
6’243

RUB

0.015

0.015

+0.0

0.015

0.015

+0.0

Noncurrent provisions

1’980

1’980

USD

0.994

0.983

+1.1

0.995

0.995

+0.0

Deferred tax liabilities

3’559

3’559

Noncurrent lease liabilities

6’243

Other noncurrent liabilities

3’951

Total noncurrent liabilities

9’490

6’243

15’733

Total liabilities

73’988

10’811

84’799LEM Financial Half Year Report 19 | 20

Page 10

3’951

LEM Financial Half Year Report 19 | 20

Page 11

Notes to the interim consolidated
financial statements

Notes to the interim consolidated
financial statements

3.
Segment information
Business segment information

5.
Current and noncurrent provisions
Warranty and customer claims
Provisions for warranty and customer claims have been estimated based on past experience and the risk assessment of management. The warranty provision is expected to be used over the next five years.
At 30 September 2019, the provisions decreased by CHF 0.5m.

Industry

Automotive

LEM Groupin CHF thousands

2019/20

2018/192019/20

2018/192019/20

2018/19

Sales

123’936

131’580

35’11837’401159’054

168’982

EBIT

27’53228’805

4’230

6’748

31’76235’553

2019/20

2018/19

4.
Revenue information
Regional information
Industryin CHF thousands

Automotive
2019/20

2018/19

LEM Group
2019/20

2018/19

Sales
Europe45’58450’927

2’641

2’175

48’22553’102

North America

13’648

14’546

5’727

8’418

19’37522’964

China

39’98939’332

14’721

18’15754’71057’489Rest Of the World

24’716

26’77612’0298’651

36’74535’427

Total

123’936

131’580

35’11837’401159’054

168’982

Geographical information
China
in CHF thousands

USA

Japan

2018/192019/20

2018/192019/20

2018/192019/20

2018/1954’71057’48918’24521’95315’60819’96913’84013’931

2019/20

2018/192019/20

2018/192019/20

2018/192019/20

2018/19

5’436

5’907

1’809

1’872

49’40747’861159’054

168’982

Sales

Italy
in CHF thousands

Germany

2019/20

Sales

Switzerland

Rest of the world

LEM Group

Litigations and consumption taxes
Despite the care that LEM applies in the separation process with personnel, such separation may result in legal conflicts. The
Group will defend its case and management estimates the reasonable risk to be adequately provided for.
The Company operates in multiple jurisdictions with complex legal and tax regulatory environments. In the frame of the continuous improvement of its processes and systems, LEM has reviewed the consumption taxes in several countries. It has appearedthat some of LEM’s subsidiaries may not have been fully compliant with their local consumption tax regulations. As a consequence, LEM has estimated consumption tax provisions according to management best judgment. Some of these positions
are inherently uncertain and include the interpretation of local regulations applied to complex transactions.
6.
Current financial liabilities
LEM Group increased its financial short-term liabilities to CHF 40.0 million (CHF 8.0 million at 31 March 2019) via short-term
credit lines in order to finance the CHF 47.9 million dividend payment of July 2019.
7.
Other noncurrent liabilities
The increase of the noncurrent liabilities is mainly linked to the increase of the retirement benefit obligations due to the discount rate decrease from 0.6% to 0.0%, slightly compensated by the increase of the fair value of plan assets of CHF 2.9 million
impacting the other comprehensive income by CHF 6.2 million on a pre-tax basis. At 30 September 2019, the fair value of plan
assets is lower than the defined benefit obligations resulting in a net pension liability of CHF 8.4 million.
8.
EquityAt the shareholders’ meeting held in Fribourg on 25 June 2019, the shareholders approved the distribution of an ordinary dividend of CHF 42.00 per share resulting in an estimated payout of CHF 47.9 million. The gross dividend effectively paid on 2 July
2019 amounted to CHF 47.9 million (prior year: ordinary dividend of CHF 40.00; total CHF 45.6 million).
In the frame of its market-making contract, LEM holds own shares. At 30 September 2019, the Group held 864 shares (31 March
2019: 795).
9.
Operating profit
Our sales decreased by -5.9% to CHF 159.1 million in the first half of 2019/20; at constant exchange rates, this represents asales decrease of -4.0%.
Our gross margin stood at 46.7%, slightly up from 45.9% in the first half of 2018/19, while EBIT amounted to CHF 31.8 million,a decrease of -10.7% on the first half of 2019/20. Our operating profit margin for the first six months of 2019/20 was 20.0%,
compared with 21.0% a year earlier. The challenging economic environment reduced sales volumes, impacting the operating
profit in value. In the meantime, the operational expenses were strictly controlled enabling the profitability to remain stable.
Sales and operating profit are traditionally slightly lower during the second half of the fiscal year due to a lower number of working days (Christmas, Chinese New Year).

LEM Financial Half Year Report 19 | 20

Page 12LEM Financial Half Year Report 19 | 20

Page 13

Notes to the interim consolidated
financial statements

Notes to the interim consolidated
financial statements

10. Income taxes
Income tax expense is calculated based on the best estimate of the applicable annual income tax rate expected for the full year.

12. Financial assets and liabilities
Financial assets

The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, the Group has taken income tax positions that management believes are supportable and are intended to withstandchallenge by tax authorities. Some of these positions are inherently uncertain and include those relating to transfer pricing
matters and the interpretation of income tax laws applied to complex transactions. The Company periodically reassesses its tax
positions. Changes to the financial statement recognition, measurement, and disclosure of tax positions are based on management’s best judgment given any changes in the facts, circumstances, information available and applicable tax laws. Considering
all available information and the history of resolving income tax uncertainties, the Group believes that the ultimate resolution ofsuch matters will not have a material effect on its financial statements.
Differences between the final tax outcome and the amounts that were initially recorded impact the income and deferred taxes
in the period in which such determinations are made. The Group calculates its expected average tax rate as a weighted averageof the tax rates in the tax jurisdictions in which the Group operates.
The decrease in tax rate to 17.3% from 20.7% is mainly linked to the High New Technology Enterprise certificate granted to LEM
Electronics China (Co.) Ltd in the second half of the 2018/19 financial year.

30.9.2019
Fair value

31.3.2019
Fair value

Amortized
cost

Cash and cash equivalents

17’123

12’538X

Accounts receivable

66’14568’651

X

74

80

X

Other noncurrent financial assets

1’147

1’036

X

Total

84’48982’30430.9.2019
Fair value

31.3.2019
Fair value

Other financial liabilities

Accounts payable

19’42022’760X

Accrued expenses

21’18426’047

X

232

168

40’000

8’000

X

0

14

X

80’836

56’989in CHF thousands

Other current financial assets

Financial liabilities

in CHF thousands

Derivative financial instruments – current

11. Consolidated cash flow statement
In order to finance the CHF 47.9 million dividend payment the financial liabilities were increased by CHF 32.0 million via our bankcredit lines.

At fair value
through profit andlost

Other current financial liabilities
Other noncurrent financial liabilities
Total

At fair value
through profit andlostX

Changes in liabilities arising from financing activities

in CHF thousands

Interest-bearing loans and borrowings
Derivative financial instruments

Interest-bearing loans and borrowings
Derivative financial instruments

Cash flows
Inflow/(Outflow)

Fair valuechanges andOthers

5’000

35’00030.9.2018

40’00030

35’000(211)

40’030Cash impact

Non-cash
impact

1.4.2019
Fair value

Cash flows
Inflow/(Outflow)

Fair valuechanges andOthers

8’000

32’000

8’168

Page 15

Currency
effect

(211)

168

Total

LEM Financial Half Year Report 19 | 20

1.4.2018
Fair value

5’241

in CHF thousands

Page 14

Non-cash
impact241

Total

LEM Financial Half Year Report 19 | 20

Cash impact

32’000Currency
effect30.9.201940’00064

23264

40’232

Notes to the interim consolidated
financial statements

The management assessed that fair value level of cash and cash equivalents, accounts receivables, other current and noncurrent assets, accounts payables, accrued expenses and other current and noncurrent liabilities that are not measured at fairvalue approximate their carrying amounts in view of their short-term nature and are consequently not separately disclosed.
The Group enters into derivative transactions such as currency risk reversal and forward contracts to hedge the USD, EUR and
JPY risks.
The purpose of these currency hedges is to manage the currency risks arising from the Group’s operations.
It is the Group’s policy that no derivatives for speculative purposes shall be entered into.
The main risks arising from the Group’s financial instruments are foreign currency risks and credit risks, whereas the others areof minor or no impact.
The Board of Directors reviews and agrees policies for managing each of those risks.

Financial calendar
The financial year runs from 1 April to 31 March
31 January 2020

9 months results 2019/20

19 May 2020

Year-end results 2019/20

9 June 2020

Annual General Meeting of Shareholders for the financial
year 2019/20

16 June 2020

Dividend ex-date

18 June 2020

Dividend payment date

During the last reporting period, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers
into and out of Level 3 fair value measurements.

13. Events after the balance sheet date
The Board of Directors and Senior Management are not aware of any significant events up to the date of approval of the interim consolidated financial statements on 30 October 2019 that would require an adjustment in carrying amounts of the Group’s
assets and liabilities.

Page 16

Address
LEM Holding SA
Avenue Beauregard 1
1700 Freiburg/Fribourg
Switzerland
Phone: +41 26 460 10 30
Fax: +41 26 460 10 39
www.lem.com

The Group’s financial liabilities at fair value amount to CHF 232 thousand per 30 September 2019 (financial liabilities of CHF 168
thousand per 31 March 2019), all classified under level 2.

LEM Financial Half Year Report 19 | 20

ContactAndrea Borla (CFO)
Phone: +41 22 706 12 50
E-mail: investor@lem.com

LEM Financial Half Year Report 19 | 20

Page 17

LEM HOLDING SA
Avenue Beauregard 1
1700 Freiburg/Fribourg
Switzerland
www.lem.com

Financial Half Year Report 19 | 20